Life Insurance Payouts On the Rise
The agency reported a four percent year-over-year increase in the amount paid out by its members.
In 2012, more than £6 million was paid daily, benefitting approximately 53,000 people. While payouts are increasing, claim denials are decreasing. The number of declined critical illness and life insurance claims decreased from 17 to 9 percent between 2006 and 2012.
Life Insurance Payouts in 2012
ABI reported life insurance payouts of £4 million per day across 28,000 families and the average payout was £49,000. Scottish Widows alone reported a weekly payout of almost £4 million for critical illness and life insurance combined. In 2012, this company paid out 98 percent of the life claims it received.
Approximately 54 percent of these claims were the result of a cancer diagnosis. According to company representative Katya MacLean, Scottish Widows is working with the insurance industry to change the times that people typically purchase life protection products.
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Decrease in Claim Denials
ABI and its members are working together to make refinements to definitions used by insurers to report rates of claims payouts. The goal is to achieve greater consistency across the insurance industry. According to Chris Pollard with Friends Life Individual Protection, taking a uniform approach regarding disclosure of data creates a “level playing field” for all parties that interact with the information.
Mr. Pollard feels that an increased level of transparency is positive from an industry perspective.
David Crozier with the adviser Navigator Financial Planning commented that the clearer insurance companies can be about definitions, the better off he and other advisers will be. He noted a recent flurry of claims through his agency and said that all but one had been successful. Clear definitions should prevent any confusion or misunderstanding on the part of claimants who may be relying upon the payouts for financial security.
Changes in Insurance Disclosure Requirements
Under proposals published by the Financial Conduct Authority (FCA) earlier this month, consumers will no longer be required to volunteer information considered material to the decision made by an insurer.
The FCA stated that consumers would instead have a responsibility to exercise “reasonable care” in not making any misrepresentations. This would pertain to the negotiation phase before an insurance contract is issued.
If reasonable care was not taken, the insurer would be permitted to a remedy against the individual. This may include canceling the policy and refusing to pay a claim or paying only a portion of a claim.
This change puts the onus on the provider to prove that the individual misrepresented circumstances. FSA did not provide concrete examples of such misrepresentation and comments on the plan are being accepted through 6 August.
ABI reports that these are not the only changes to expect in the insurance market. Director General Otto Thorensen stated that a number of factors are shaping the insurance market in the UK, causing many changes. He believes that insurers will face both opportunities and challenges.
Mr. Thorensen called for insurance advisers and providers to collaborate to determine how the industry can play a major role in the UK economy with help from the governmental insurance strategy.